Qantas says yields to be lower in H1 2013

AIR fares continue to be under pressure in Australia as Qantas fights for a bigger share of the domestic passenger market.

Qantas' domestic operations, including its regional arm QantasLink, carried 1.97 million passengers in October, up 5.9 per cent from the same month a year earlier, when chief executive Alan Joyce grounded the entire fleet as part of an industrial dispute.

However, the growth in passengers did not match the 10.7 per cent lift in domestic capacity in October.

As a result, revenue seat factors - an industry measure that looks at the number of passengers flown and how far they fly - fell 3.5 percentage points to 78.2 per cent.

Qantas said yield, or average airfares per passenger, across the airline group was expected to be lower in the first half of 2012/13 compared with the prior corresponding period "largely due to increased capacity in the domestic market".

Macquarie analysts Russell Shaw and David McGregor said in a research note the October monthly operating statistics, published on Friday, reiterated the ongoing negative yield environment so far in the first half of 2012/13.

"While we still expect that Qantas retains the lion's share of premium travel, the subdued economic environment on the east coast, partnered with the uncertainty in the mining states, will result in continued pressure on the demand side and ultimately yields," the pair said.

"Commentary around cutbacks in major mining houses and even government expenditure only adds to the challenges facing mainline domestic's underlying operating trends."

Across the Qantas airline group, which includes Qantas domestic and international, as well as Jetstar's Australian and overseas operations, passenger numbers rose 7.4 per cent, while the revenue seat factor fell 1.6 percentage points.